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Milestones : G-20 seeks coordinated global regulation

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December 01, 2008
Author:
Nick Kochan

GLOBAL

Brown: A vocal advocate for global financial regulation.

After the recent meeting of the Group of 20 countries in Washington, DC, in mid-November, the likelihood of the creation of a new, more international regulatory system for the financial world increased sharply. But global leaders stepped back from initial suggestions that the best way to prevent a future financial meltdown would be to create a single global regulator.

At the meeting, it was agreed that the watchwords for the new regulatory style should be transparency and accountability. The most vocal of the G-20 leaders was Britain’s premier, Gordon Brown, a long-time advocate of a new global architecture for the financial system whose failings are claimed to have been a root cause of the current crisis.

The pillars of the existing system set for overhaul include national and international bodies with regulatory responsibility over the banks, ratings agencies, accounting standards, the “shadow banking system” and the offshore regimes. G-20 countries agreed it was necessary to overhaul regulations to reflect changes in the market brought on by globalization. Banks, for example, are perceived to be able to slip under the radar of the national regulators when they have multi-jurisdictional operations.

European countries are pushing for “mandatory colleges of national supervisors” for cross-border banks. This arrangement of linking existing regulators, such as the European Central Bank, the Federal Reserve and the Bank of England, replaces an earlier proposal to create a separate transnational super-regulator.

Changes that may take place as a result of the G-20 meeting include forcing ratings agencies to register with local regulatory authorities, who would have the power to bar any that fell beneath determined standards. The G-20 wants off-balance-sheet assets disclosed to shareholders and auditors. The leaders are also pushing for discretion over the imposition of “fair value accounting,” which requires companies to mark most of their financial assets to current market prices.